Dollar-Rebound May Be Imminent, Should U.S. Slowdown Hit Global Economy ?
According to analysts, the dollar may be set for a rebound after having hit record lows against the Euro and other major currencies recently. The decline of the greenback has been unrelenting this year with the U.S. currency down 5 percent against the British pound, 7 percent versus the yen, a whopping 10 percent against the single currency, and 14 percent versus the Canadian dollar. Maurice Obstfeld of the University of California at Berkley and Kenneth Rogoff of Harvard University tabulated in 2005, that the dollar would need to decline as much as 30 percent against the Federal Reserve's trade-weighted basket of currencies to balance the U.S. trade deficit, now tagged at more than 6 percent of the nation's economic output.
According to that theory, the dollar would have to drop another 20 percent, before it hits rock bottom. But some analysts say currency markets are difficult to predict, and there is an argument to be made that the dollar could bottom-out in the near future.
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